Walker’s Medicaid Reform Exposes ObamaCare Weaknesses

Since the passage of ObamaCare in 2009, states have been faced with the problem of how to pay for the unfunded mandates forced onto them by the legislation. Governor Scott Walker’s approach to ObamaCare, including his recent decision to forego additional federal Medicaid dollars, might offer states a fiscally responsible blueprint for how to tackle the challenge. Healthcare policy experts from around the country have offered insights that would seem to suggest that Walker’s current approach is one that is both politically and fiscally savvy.

ObamaCare’s massive size, scope and price tag have all been the target of criticism from conservative policy experts and politicians alike. The President’s namesake legislation has become a byword for well meaning reforms that adopt all the wrong approaches, conservatives argue. “ObamaCare is too overarching and it runs contrary to the practices of this country so it cant last,” Rep. Paul Ryan (R) told a crowd of constituents after the November election. The legislation is “fundamentally flawed,” Ryan concluded.

In November of 2012, Walker announced that Wisconsin would not set up and run its own health insurance exchange in compliance with ObamaCare. ObamaCare gives states the option of setting up and running their own exchange – mostly at their own expense – or letting the federal government set up an exchange for them. In both cases, the exchange would function under the complete control of the federal government; states have no real control over their own exchanges, although that option did make them pay for much of the exchange.

A year earlier, the Walker administration had been pushing for a Wisconsin paid-for exchange that complied with ObamaCare dictates. Conservative outrage forced Walker’s administration to drop the idea and lawmakers in the state Senate eventually killed the proposal.

With his latest decision to refuse federal Medicaid dollars, Walker scored a savvy victory for Wisconsin. Just like with the insurance exchange, the federal Medicaid dollars came with strings attached. ObamaCare appropriated the money, but phased out portions of the federal funds and subsidies for the expansion over time. After the first three years were up, Wisconsin was going to be responsible for footing millions of dollars in new costs.

By shifting some current Medicaid enrollees onto the soon-to-be-imposed federal health insurance exchange, Walker saved Wisconsin from having to spend more money and forced the federal government to consider how it will pay for these new exchange participants. ObamaCare requires the federal government to subsidize the insurance premiums of certain low-income consumers in the exchange system.

“Because the exchanges are a federal program, fully funded by Washington, the state government achieves fiscal certainty in that population,” wrote Avik Roy, a healthcare policy expert, in a piece praising Walker’s decision.

Roy summarized the Walker plan by calling it “a far better path forward,” for states looking to manage the burdens forced on them by ObamaCare.

By forcing the federal government to assume complete responsibility for ObamaCare, Walker is placing both the financial and political responsibility for the reform where it belongs: back in a dysfunctional Washington, D.C. Conservative policy observers like Ben Domenech of The Heartland Institute have noted that forcing Washington to pick-up the tab for ObamaCare makes it more likely for the massive entitlement and regulatory package to be overhauled or completely revamped.

“[G]overnors may calculate that it would be better not to politically own the process of implementation, particularly given the many pitfalls and organizational challenges involved, if they do not have real authority,” Domenech wrote late last year.

In a Washington already wracked by debt financing to expand government, Walker’s decision to force Washington to assume more responsibility for its big-spending ways could be a powerful incentive for more realistic reforms.